Chairman's Statement

Extracted from Annual Report 2024

On behalf of the Board of Directors (the "Board"), I would like to present our annual report for the financial year ended 31 December 2024 ("FY2024").

In 2024, geopolitical risks, including escalating conflicts in more regions around the world¹ and renewed rounds of protectionist tariffs², have heightened the potential for volatile and uncertain macroeconomic changes. The World Economic Forum's Global Risks Report 2024 highlights geopolitical tensions as the primary threat to global economic growth in the years ahead.³

Despite the mixed macro-environment increasingly fraught with potential challenges, the Group is still striving to achieve the progressive development of its GI projects. At the close of FY2024, the Group had a sizeable portfolio of 11 operational GI projects, including Shanxi Xinjiang Project which commenced commercial operations at the end of 2023. Key milestones were also achieved in the continued development of other existing projects. For instance, Quanjiao Project has completed the construction of a biomass boiler to supply steam to industrial end-users, in addition to the existing boiler; Yongxing Plant's solid waste JV was operational; while Xintai Project saw an improved performance followed technological reforms.

Furthermore, the overall GI business demonstrated notable resilience in 2024. Total steam sales volume rose to 11.46 million tons while GI recurring revenue reached RMB3.3 billion.

Excluding a one-off provision for bad debt in 3Q2024 related to a reduction in biomass power subsidies for two GI projects— Xintai Zhengda Project and Tongshan Project—that use biomass boilers to generate electricity for sale to the State Grid, GI recurring EBITDA⁴ rose 12.4% YoY to RMB 1,062.2 million while GI recurring PATMI⁵ rose 9.5% YoY to RMB 372.1 million in FY2024.

Including this one-off provision for bad debt, GI recurring EBITDA and GI recurring PATMI declined by 0.2% YoY and 14.1% YoY, to RMB942.7 million and RMB292.0 million, respectively, in FY2024.

Furthermore, GI recurring operating cash inflow⁶ reached RMB678.2 million in FY2024, an improvement of 28.5% over FY2023.

On balance, FY2024 revenue, profit (excluding the provision for bad debt) and cashflow improved despite the various challenges, driven by a comprehensive set of factors. These included economies of scale from increased steam sales volume, the price adjustment mechanism, optimised feedstock procurement, benefits from the application of waste heat recovery technology in Xintai Zhengda Project; and refined management practices, among others.

Looking ahead, despite the volatility and uncertainties across the various sectors, Sunpower will strengthen itself and remain focused on enhancing and optimising the profitability and cashflows of the GI business through the continued ramp-up of its GI projects and further execution of its refined management practices to unlock potential future growth opportunities. The Group's growth strategy continues to be underpinned by its adaptable business model and key structural drivers, including the relocation of enterprises to industrial parks served by the GI projects, organic customer growth, the long-term structural expansion of industrial parks with strong economic viability due to their locations in economically developed areas or industry clusters of excellence, and the continued closures of small boilers. In addition, the Group intends to leverage artificial intelligence (AI) to enhance the efficiency of the GI projects to reduce operational costs and boost profitability.

In parallel, the Company will continue to evaluate its project pipeline for quality projects with potential. The Group will strive to address and adapt to the challenges and impacts of potential changes in government policies and the macro environment.

On 9 December 2024, the Company announced the undertaking of a renounceable, non-underwritten Rights lssue of CBs due in 2030 (the "CB Rights lssue"), and the partial repayment of the existing CBs to DCP and CDH through the use of the current resources of the Group, namely bank borrowings (the "Partial Redemption")⁷, in order to fully repay the existing CBs with an aggregate principal amount of approximately US$130 million that mature in April 2025.

The CB Rights Issue will provide the entitled shareholders who are confident of the future prospects of the Company with an opportunity to further participate in the equity of the Company through the conversion of the CBs into equity at a reasonable discount, while benefiting from the CB coupon interest. The combination of CB Rights Issue and Partial Redemption aims to achieve a balanced overall mix of debt and convertible securities, mitigating the potential excessive dilutive effect.

As at the date of publishing this Annual Report, the Company has completed three Partial Redemption tranches, repaying US$81.25 million to the Existing Bondholders, including interest and YTM redemption premium on the portion of the outstanding principal amount of the Existing Bonds that was redeemed. In addition, the Group is on track to complete the CB Rights Issue7 using the funds raised from the CB Rights Issue to redeem the balance of the existing CBs, including the principal amount, accrued and unpaid interest, and a premium, that would achieve the Redemption YTM for the exiting Bondholders, DCP Capital and CDH Investments.

The Company would like to extend its appreciation to Mr Li Lei and Ms Wang Guannan, the directors who represented the exiting CB holders for their steadfast support since their investments in the Group in 2017 and 2018, and to welcome its new directors, Ms Pan Shuhong and Mr Ngoo Lin Fong, who represent the new CB holders, to the Board.

In addition, with the significant progress made in fulfilling its redemption obligations under the Existing Bonds, the Company will be better positioned to focus on its business strategy and continue to deliver value to its shareholders.

On behalf of the Board, I would like to thank our shareholders, customers, and business partners for your continued trust and support.

The Group remains focused on the improvement of shareholder value. Sunpower Group is on track to realise its growth potential with the focus on unlocking more potential value from its valuable assets for its shareholders and bondholders in the long term.

Guo Hong Xin
Non-Executive Chairman

¹ https://www.economicsobservatory.com/how-are-geopolitical-risks-affecting-the-world-economy
² https://edition.cnn.com/2024/09/13/politics/china-tariffs-biden-trump/index.html
³ https://www.weforum.org/stories/2024/08/geopolitics-inflation-central-banks/
⁴ For the definition of GI recurring EBITDA, please refer to the GI Financial Highlights page of the 2024 Annual Report.
⁵ For the definition of GI recurring PATMI, please refer to the GI Financial Highlights page of the 2024 Annual Report.
⁶ For the definition of GI recurring operating cashflow, please refer to the GI Financial Highlights page of the 2024 Annual Report.
⁷ For full disclosure, please refer to the announcements of the Company from 9 December 2024 to 3 April 2025.